In its monthly Oil Market Report for September released Wednesday morning, the International Energy Agency (IEA) said that global crude supplies fell by 720,000 barrels per day in August, the first decline in four months.
The agency attributed the drop to unplanned outages in production from non-OPEC countries. Year over year, however, supply is up by 1.2 million barrels a day.
Commercial inventories in July in OECD countries totaled 3.0016 billion barrels, a drop of just 5 million barrels from the June total. OECD stockpiles are now 190 million barrels above the five-year average, down by 29 million barrels from the prior month’s total. The IEA said that the impact of Hurricane Harvey could drive refined product stockpiles below the five-year average by next month’s report.
For all of 2017, total demand is now forecast at 97.7 million barrels a day, up by 1.6 million barrels a day (2.4%) compared to 2016. Demand rose by 2.3 million barrels a day in the second quarter of this year. For 2018 the IEA is forecasting growth of 1.4 million barrels a day (1.4%).
OPEC crude oil production fell by 210,000 barrels a day to 32.67 million barrels in August, led by a strong recovery in Libyan production. Non-OPEC countries cooperating with the cartel in production cuts achieved greater than 100% compliance for the first time and OPEC compliance with quotas rose from 75% in July to 82% in August.
The IEA suggested that now that the impact of a major storm on the U.S. refining hub has been demonstrated, it may be a good time for the OECD to consider developing a strategic reserve of refined products, similar to the strategic reserve of crude oil:
The oil market has coped relatively well with the challenges posed by the hurricane season thus far, but that said, now may be a good time to consider steps to mitigate the impact of future severe-weather events. This could encompass reviewing the robustness of the Gulf Coast energy infrastructure, including production facilities, refineries, crude and product storage capacity, pipelines and marine infrastructure, and what measures can be taken to minimize disruptions to port operations.
Early Wednesday morning, West Texas Intermediate crude for October delivery traded at $48.71 a barrel, up about 1% compared with Tuesday’s closing price of $48.23. Brent crude for November delivery traded up about 0.4% at $54.71 a barrel in London.